TAIGO LTD v. PROCESS AUTOMATION INTERNATIONAL LTD

HCA 1133/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1133 OF 2006

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J U D G M E N T

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1.  This is an appeal against the decision of Master J Wong given on 13 April 2006 that the defendant pay interest on the sum of $3,579,797.42 at the judgment rate from the date of the writ to the date of the order and thereafter at the judgment rate, and further that the defendant pay the plaintiff half the costs of the Order 14 application taken out on 17 October 2005 with the remaining half of the costs to be in the cause of the plaintiff’s remaining claims, with certificate for counsel.

2.  The proceedings were instituted on 15 June 2005.  The plaintiff’s claim is for the price of goods sold and delivered between October 2004 and April 2005.  The plaintiff claimed :

(1) An outstanding sum of $3,774,887.42 including a figure of $195,000 which is a sum after withdrawing a 10% discount under two purchase orders, and

(2) $613,770.29 in respect of interest accruing up to 15 June 2005.  The plaintiff claims a contractual rate of interest of 3% per month on overdue payments.

3.  The plaintiff pleaded inter alia that the defendant had, by a fax sent on 1 April 2005, admitted liability for an outstanding amount of $3,579,797.42.  This is the balance of the plaintiff’s claim after deduction of the figure of $195,000 mentioned above.

4.  The defendant has filed an Amended Defence in which it denies liability for the contractual interest and pleads that it is not open to the plaintiff unilaterally to withdraw the agreed discount.  It admits that it sent a fax on 1 April 2005 but does not admit that it thereby admitted liability for $3,774,887.42.  It pleads that it had already paid into court the sum of $3,579,797.42 being the outstanding price for the sale of the goods.

5.  In fact this payment was made on 14 July 2005 “in satisfaction of the cause of action in respect of which the plaintiff claims”.  A further payment of $76,405.58 was made on 27 January 2006, “being interest on the sum of $3,579,797.42 up to the 14^th July 2005”.

Principles

6.  This is an appeal against orders for interest and costs.

7.  So far as appeals on costs are concerned, the principles are conveniently, and the authorities compendiously set out by Deputy Judge Cheung, as he then was, in Man Fong Hang v Man Ping Nam & Ors., [2002] 4 HKC 534 at 544 :

“The circumstances under which a judge sitting in chambers on appeal may disturb an order as to costs made by a master are limited.  He or she may only do so if the master’s order was unreasonable; if the order made erred in law; if the master failed to take into account proper matters; or if he or she took into account matters that should not have been taken into account.  See Hoddle v CCF Construction Ltd [1992] 2 All ER 550; Lessy SARL v Pacific Star Development Ltd [1996] 2 HKC 326; China Venturetechno International Co Ltd v New Century Chain Development Co Ltd (Civ App 20/1996, 3 July 1996, unreported); Hon Kwok Lun Wilson v Shin Pok Lai Alvin (HCA 10334/1998, Suffiad J, 8 March 1999, unreported); Honnin Development Ltd v Ho Ming (HCA 16376/1999, Deputy Judge Poon, 14 December 2000, unreported); Hong Kong Civil Procedure 2002, Vol 1 para 62/2/11.”

Costs are in the discretion of the court.  So is interest.  It seems to me that the same principles must therefore apply in an appeal against and order for interest, as apply in an appeal against an order for costs.

The Order for Interest

8.  The plaintiff’s claim for interest is based on a term contained in its quotations.  The plaintiff pleads that it has suffered loss and damages, sets out the principal sum less discount and the interest figure, and continues :

“particulars and breakdown of the above sums are provided in Appendix 1 attached hereto in which the interests are calculated based on full months up to the date the writ is issued, i.e. 15 June 2005”.

9.  As appears from the affirmation of the plaintiff’s director, the plaintiff’s case is that its quotations provided for 30 days’ credit, and most of them provided for interest thereafter at 3% per month.  The calculations are set out in Appendix 1 by reference to the various quotations and corresponding purchase orders placed by the defendant.

10.  The defendant’s case is that it did not agree to all the terms stipulated in the quotations, including that for overdue interest.  It relies on its own purchase orders, signed on behalf of both parties.  Its director says that the purchase orders, which provided for 30 or 60 days for payment, and contain no terms as to interest thereafter, superseded the plaintiff’s quotations.

11.  The defendant has been given unconditional leave to defend in respect of the plaintiff’s claim for interest up to the date of the writ.  This being so, the defendant argues that the issue of interest should be left to be dealt with at the trial of this issue.  It is said that the award made by the Master is inconsistent with the continuing claim of 3% per month.  Further, it may be found on trial that the plaintiff is entitled to a lesser rate of interest than the judgment rate awarded, such as the commercial rate or even the investment rate.

12.  It is argued that the contractual rate of interest should be regarded as a penalty.  I do not need to consider that here, as it is a matter for trial, though I have to say that interest at 36% per annum hardly seems at first glance to be a reasonable estimate of the plaintiff’s loss.

13.  As Ms Lau, counsel for the plaintiff, has pointed out, the plaintiff claims only for interest at 3% per month up to the date of the writ.  Mr Hon, for the defendant, draws attention to the 3^rd prayer in the Statement of Claim for “further interest accruing under the various orders”.  This appears to show that the plaintiff is claiming interest at the contractual rate until payment.

14.  It is difficult to see that the plaintiff is pleading a claim for interest at the contractual rate continuing beyond the date of the writ.  It is true that there is a claim for “further interest accruing” but there is also a claim in paragraph 11 of the Statement of Claim for interest pursuant to sections 48 and 49 of the High Court Ordinance.  Interest under section 48 could no doubt be calculated on the contractual rate but it has not been.

15.  According to the commentary in the Hong Kong Civil Procedure 2006 at paragraph 6/L/27, if judgment is given under Order 14 the court may at the same time award interest, but discretionary interest will only be awarded at “ordinary” rates, and if more is wanted, interest will be ordered to be assessed.  A discussion of “ordinary” rates appears at paragraph 6/L/16, and the judgment rate is one of them.

16.  In this case, more was not wanted.  I suppose that if the plaintiff had wished, it could have calculated interest at the contractual rate it claims, until the date of the hearing of the Order 14 summons, but it did not.  The Master exercised his discretion under section 48 and applied the judgment rate from the date of the writ.  Given that what is really in issue on interest is the interest up to the date of the writ I cannot see that there is any inconsistency.

17.  It is also argued that the plaintiff’s election to proceed under Order 14, given that the defendant had already admitted liability for $3,579,797.42 was an abuse of process.  The plaintiff should have applied for judgment on admission under Order 27 and applied for payment out of the sum in court as early as July 2005.  If that had been done, the residue of the claims could have been transferred to the District Court, thus saving costs.  If the plaintiff had obtained payment out, the defendant would not have been liable to pay interest at the judgment rate from the date of the writ.

18.  If the court had ordered judgment on an admission, it would still have been open to it to order interest from the date of the writ to the date of judgment at the judgment rate or whatever rate it thought suitable, and thereafter at the judgment rate, but obviously the period until the payment out would have been shorter.

19.  However, I do not see that there has been an abuse of process.  There is no pleaded admission.  A payment into court is not an admission of liability.  The plaintiff refers to a written admission by fax, and it is agreed that a fax was sent, but neither side was able to produce the fax before me.  I do not know how the court could have given judgment on an admission in the absence of a pleaded admission or an unequivocal written admission.

20.  I cannot see, therefore, that it can be said that the Master wrongly exercised his discretion to order interest on granting the judgment under Order 14.

The order for costs

21.  Reliance is again placed on the fact that the plaintiff did not proceed under Order 27, and I have dealt with that.  It is also said that the plaintiff should have sought summary judgment only for the sum of $3,579,797.42, because it knew that the defendant had an arguable defence on issues of interest and the withdrawal of discount.  The defendant should be treated as having succeeded on the Order 14 summons and be entitled to the costs or at least all the costs should be in the cause.

22.  In fact the Master gave the plaintiff half the costs of the Order 14 application and left the other half in the cause.  Given the outcome of the application, i.e. a partial success for each side, this seems appropriate to me.  But I am not in any event to substitute my discretion for that of the Master.  Nothing has been demonstrated to me which would indicate that the Master exercised his discretion on costs wrongly, on the principles set out above.

Result

23.  The appeal is dismissed with costs (nisi) to the plaintiff in any event.